Planning for College: A Consumer Approach to the Higher Education

Marketplace

The College-Bound Decision Tree: A Consumer Approach

by

C. Anthony Broh

Broh Consulting Services, LLC

Consumer Approach

What is the price?

What is the risk?

How does it compare to others?

Consumer Approach

What is the price?

Published Price

Published Price and Net Price at Public and Private Four-year Institutions

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Con

stan

t (20

08) D

olla

rs

Published Price at Private 4-year Published Price at Public 4-year Net Price at Private 4-year Net Price at Public 4-year

$22,260

$35,640

$17,450

$21,200

Net Price

Published Price and Net Price at Public and Private Four-year Institutions

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

Con

stan

t (20

08) D

olla

rs

Published Price at Private 4-year Published Price at Public 4-year Net Price at Private 4-year Net Price at Public 4-year

$8,380$7,120

$9,860

$15,210

Consumer Approach

What is the risk?

Paying for College

Child Parent Other

Past Savings and Assets

Assets, Savings and 529Other Investments Grandparent 529

Present

Summer wages and job earningsFederal Work Study ProgramState Work Study Program

Institutional Work Study ProgramOutside Scholarships

Taxed & Untaxed Parent IncomeEmployer Benefit Program Grandparent 401(k) minimum

distribution

Future

Unsubsidized Stafford LoanState Unsubsidized Loan Program

Institutional Student LoanPrivate Student Loans

Credit Card DebtSubsidized Stafford Loan

Perkins LoanSubsidized State Loan

Institutional Loan Program

PLUS LoanHome Equity Loan

Other Private Loans

Family

Res

ourc

es

The “Price” Includes Interest Payments

Amount of Interest Paid for 15-Year $20,000 Loan withFees and Interest Rates from College Loan Programs

$0 $5 $10 $15 $20 $25 $30 $35 $40

Private, Alternative, or DTC Loan, Private

Private, Alternative, or DTC Loan, Credit Union

Home Equity Line of Credit

Unsecured Private Loan

Home Equity

MEFA, deferred payment

MEFA, immediate payments

PLUS

Unsubsidized Stafford

Subsidized Stafford

College Loan

Perkins

Massachusetts NIL

Thousands of Dollars

After Fed & MA Taxes

Before Fed & MA Taxes

Variable Rate

Fixed RateFor Students from

Low Income Families

Policy Implications

Use “Net Price” as central concept of financial aid.

Describe Parent Loans, Student Loans, and Private Loans together with consumer information: APR, Total Interest, Monthly Payments.

College Financial Aid offices to take pro-active role in family financial planning.

Consumer Approach

How does it Compare to Others?

Mental Calculation

Educational Attribute of Value

Net Price

Selected Quantifiable Attributes

Students with SAT-Reading of 600 or higher Students with SAT-Math of 600 or higher Budgeted dollars on Instruction Probability of Graduating in four years Faculty-student ratio

(Only data from public sources)

SAT-Reading 600+ per Dollar of Net PriceSAT-Verbal above 600 per Dollar of Expected Net Price

Westfield

Fitchburg

Umass Dartmouth

Worcester

Salem

Framingham

Bridgewater

Bentley

Umass Boston

Boston University

Umass Lowell

Clark

Emerson

Boston College

Smith

Tufts

Holy Cross

Brandeis

Wellesley

Umass Amherst

Amherst

Williams

MIT

Harvard

SAT-Quant. 600+ per Dollar of Net Price

SAT-Math above 600 per Dollar of Expected Net Price

Salem

Fitchburg

Westfield

Bridgewater

Framingham

Emerson

Umass Dartmouth

Umass Boston

Worcester

Clark

Umass Lowell

Boston University

Boston College

Bentley

Tufts

Smith

Holy Cross

Brandeis

Wellesley

Williams

Amherst

MIT

Umass Amherst

Harvard

Instructional Expenditures per Dollar of Net Price

Instructional Expenditures per Dollar of Expected Net Price

Emerson

Bentley

Clark

Holy Cross

Framingham

Boston College

Fitchburg

Tufts

Westfield

Bridgewater

Brandeis

Umass Dartmouth

Smith

Salem

Worcester

Boston University

Umass Amherst

Umass Boston

Umass Lowell

Amherst

Wellesley

Williams

Harvard

MIT

Graduation Rate per Dollar of Net Price

Graduation Rate per Dollar of Expected Net Price

Umass Boston

Salem

Worcester

Umass Dartmouth

Boston University

Emerson

Bentley

Bridgewater

Tufts

Boston College

Fitchburg

Framingham

Clark

Smith

Brandeis

Umass Lowell

Holy Cross

Wellesley

MIT

Amherst

Williams

Umass Amherst

Harvard

Westfield

Faculty-student Ratioper Dollar of Net Price

Faculty-Student Ratio per Dollar of Expected Net Price

Boston University

Boston College

Emerson

Bentley

Holy Cross

Smith

Brandeis

Clark

Tufts

Umass Dartmouth

Umass Amherst

Wellesley

Amherst

Umass Boston

Williams

MIT

Westfield

Bridgewater

Fitchburg

Harvard

Framingham

Umass Lowell

Worcester

Salem

Policy Implications

Use “Educational Attribute” as central concept of college choice.

Provide information about educational attributes so families can make mental calculation of institutional strength and weakness.

College Admissions and Financial Aid offices take pro-active role in helping families decide want they want from college.

C. Anthony BrohBroh Consulting Services, LLC

c.anthony@broh.com

Dana Anselco-author

Planning for College: A Consumer Approach to the Higher Education

Marketplace

Thank You!

C. Anthony BrohBroh Consulting Services, LLC

c.anthony@broh.com